Are you new to the whole nonprofit game? Has your business never given to a charitable organization before? Or are you being approached by multiple people and trying to figure the best way to give? To make the difference between a sponsorship and a donation a bit clearer, we’re unpacking these fundraising terms for you so that your business can easily understand giving strategies and make the right choices. 

Sponsorship

• The main difference between a sponsorship and a donation is that sponsorships are based on reciprocity – where cash or in-kind gifts are contributed, usually in exchange for marketing or advertising consideration.
• They are typically bound by a written agreement between the two parties stating the value of the sponsorship and the benefits for all involved. The public sector receives cash or goods in kind and in exchange, the sponsor receives publicity designed to enhance its reputation (e.g. flyers, posters, advertisements.)
• Sponsorship usually means supporting special or ongoing events, activities, or organizations. This is done financially or through the provision of products or services.
• Sponsorship has a material advantage to the company in terms of raising the company’s public profile (i.e. to sell more products and services) and to increase positive awareness of the company or product by associating it with a good cause.
• Sponsorship is highly public.
• Money usually comes from the marketing, advertising or communications budget and is decided by the person(s) managing these areas.
• Companies strive to build a relationship with the organization and continue to develop and evolve this relationship over time (this relationship might grow to include employee involvement, advertising programs, networking opportunities for executives, etc.).
• Sponsorships are not always cause-related. For example, they can also be for sport or commercial entertainment activities.
• Sponsorship fees are not usually eligible for tax receipts, which makes sense as the sponsoring company typically receives a right, privilege, benefit or advantage for their payment to the charity. However, not all sponsorships have benefits attached, and may be effectively more like donations. Please check the relevant regulations in your country (such as the Canada Revenue Agency or the US Internal Revenue Agency).

Examples of sponsorships

1. An IT firm sponsors a large Tech Networking Event. Their $1,000 sponsorship package contributes to providing catering for the evening. In return, the sponsor receives a free stall at the event which provides great exposure for their business.
2. An independent cinema sponsors a summer film camp. Their $2,500 sponsorship package contributes to printing costs for promotional materials and the purchase of camera supplies for the cohort. In return, the sponsor has their logo on all signage for the event and a chance to welcome everyone to the film camp.
3. An outdoor store sponsors a children’s soccer team. Their $5,000 sponsorship package pays for the coach’s wages and the purchase of a new uniform for the team. In return, the sponsor receives the placement of their logo on the team players’ jerseys.

Is a sponsorship right for you?

A sponsorship is a creative way for companies to give back and allows you to leverage your relationship with nonprofits. It’s not only a great way of supporting an event that is in line with your organization’s values, it also provides an excellent opportunity to market your brand to new and relevant audiences. Think about what non-profit organizations exist in your community and what benefits they might be able to provide to you in return for a sponsorship. Open up a conversation! You might be surprised by the possible tangible outcomes that offer benefits for everyone.

Donation

• A donation is an altruistic gift, either with a general charitable purpose or for the support of a particular project. 
• Donations may come in the form of cash or in-kind gifts such as gift vouchers from a local retail store, food from a supermarket, office equipment from a small business, etc.
• It should be considered as a goodwill contribution, without the need for anything in exchange from the non-profit organization.
• Tax receipts can often be issued for donations, provided there are no benefits or advantages received by the donor. However, the regulations about what is eligible for a charitable receipt, as well as the value that making donations gives (over the option of sponsorship) varies from one country to the next, so it is important to look into this in your jurisdiction.
• There is less public fanfare around this type of giving. Donors are usually thanked privately, often with a personalized acknowledgment, and in a quiet way. While donations are not made for marketing purposes, a business can (and should) let their community know that they have recently donated to a charitable cause. It’s always great to share that warm and fuzzy feeling when you’ve done something charitable!

Examples of donations

1. A clothing store owner makes a donation of $100 worth of clothing to her local Senior’s Centre on behalf of her business. The centre does not have a charitable designation, so there is no official receipt available. The store owner receives a thank you letter receipting her gift.
2. A lawyer makes a personal donation of $500 to a charitable arts organization to support their operations. He receives an official tax receipt and a personalized thank you card.
3. An independent supermarket donates $1,000 worth of food and supplies to a Community Food Centre for their summer food drive. They receive a tax receipt, and the food centre posts about their donation on Facebook.

Is a donation or a sponsorship right for you?

A donation is a fantastic way of contributing to the causes that you really care about. Most non-profit organizations need help with the boring things, like paying rent and staff, purchasing office supplies and covering the costs of their utilities. You can make a huge impact on the daily work of charities even with small donations. Better yet, you can choose to support a variety of non-profits, even with little donations, and extend your reach in your community.

Online giving has never been easier with platforms like Canada Helps, and Charitable Impact Fund which is wonderful for businesses who are time-poor, and we know plenty of small to medium enterprises fall in this category!

However, as a business, you may want to build a mutually-beneficial relationship with a nonprofit or charity, exchanging cash or in-kind for recognition, access to target markets, or other reciprocated benefits.

To sum it all up, the main difference between a sponsorship and a donation is the notion of mutual benefit and promotional value for the sponsor. If your business is new in the community, a sponsorship is a great way to get to know your neighbours and introduce your brand. On the other hand, a donation is a simple way of giving back to important causes quickly and easily. You might even find that in different situations, both sponsorships and donations are right for you!